Minutes 03/24/2025 - Laserfiche WebLink

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March 24, 2025 Factoring in the Pension Obligation Bonds, the city is currently in compliance with its policy related to the assessed value of real property in the city. This metric suggests Portsmouth is utilizing a significant portion of its debt capacity, but future years show a steady decline in the ratio, indicating an ability to fund substantial projects in future years. The city is in the process of reviewing its policies to determine if amending the policy to remove Pension Obligation bonds from the calculation is advisable. 2. Debt Service to Revenue Ratio, less than 10% FINDING: Compliant at 8.23% This ratio falls below the typical threshold of 10% and is projected to decline over the next five years. This indicates that debt capacity can be leveraged to achieve critical infrastructure and facility needs. However, the city should be mindful of its debt affordability and limit debt issuances to at or near current debt service levels. 3. 10-year payout ratio greater than 50% FINDING: Compliant at 73% This ratio measures the amount of principal paid over the last ten years relative to the total outstanding debt. It indicates that the city is responsibly amortizing its debt and avoiding a situation in which it is deferring its debts to the detriment of future decision- makers. Legacy Pension Systems The city complies with its retirement system funding policy, which states that the city will find the actuarially determined contribution (ADC) for the city’s legacy pension systems. The FY 2026 budget includes $9.7 million to fund the city’s legacy pension obligations, with $7.6 million going to the Fire and Police Retirement System and $2.1 million going to the Supplemental Retirement System. City Council has also directed staff to evaluate and provide an additional $1,250 payment, costing $1.2 million. An additional $10.9 million goes to pay debt service on the Pension Obligation Bonds. The total $20.8 million one-year budget funds 983 total participants. This substantial contribution poses significant challenges to the city’s finances. It is imperative that in our decision-making process, we ensure the long-range viability of the plan so that all retirees continue to receive the promised benefits and the system remains solvent. As of the most recent valuation, June 30, 2024, the combined net pension liability for the city’s legacy pension plans was $71.3 million. As of September 2024, the “funded status” of the legacy systems is 71.6%. The city’s Other Post-employment Benefits (OPEB) liability of its Retired Employees Health Care Program has declined substantially in recent years. In 2018, the city established an OPEB Trust Fund. The FY 2026 budget includes a $1.5 million contribution. Since the establishment of the trust, the city has contributed an additional $7.0 million. City staff and advisors recommend formalizing a policy to build upon this funding stream until there is no unfunded liability. Citizen Engagement and Budget Adoption Process Public participation is an essential component of the budget development process. Citizens are encouraged to review the Proposed Budget and provide input through multiple opportunities: Public hearings will be held during regular City Council meetings on: Tuesday, April 8, 2025, at 7:00 PM  Tuesday, April 22, 2025, at 7:00 PM  Budget ordinances will be presented for adoption on Tuesday, May 13, 2025.